The Reality of High Interest Rates

Hello, I’m Keith Gordon. I’m a real estate broker and a loan officer with American Financial Network. In this video, I’ll share key strategies for buying a home in today’s high-interest rate market.

While today’s rates (6.90%–7.10%) may seem high, they are still historically low. In the 1980s, buyers thought 10-12% rates as a great deal. However, recent years of ultra-low rates (2.75%–3.25% in 2022) have driven up home prices.

But interest rates aren’t the only challenge—buyers also face high property taxes and homeowners’ insurance, which can cost up to $12,000 per year on a $400,000 home.

Smart Financial Planning for Buyers

When applying for a mortgage, lenders may approve buyers to spend up to 47% of their income on housing costs and other debts such as student loans, car payments and other recurring debts. However, a more conservative approach is recommended. Ideally, you should have six months of mortgage payments in reserve. Lenders want to see at least 2 months of reserves.

So, how can you preserve cash while buying a home?

• 1. Get a Gift from a Family Member
  • If you have a financially secure relative (not a friend or employer), they can contribute toward your down payment through a gift letter. This must be done properly, so consult your loan officer for guidelines.
• 2. Negotiate Seller Concessions
  • In a buyer’s market, you have leverage! You can ask the seller to cover part of your closing costs—typically 3%–6% of the sales price.

How does this work?

• The request is written into the contract, typically on page 12 (lines 590–630) of the Florida FAR/BAR “As-Is” Residential Contract.
• Example language:
  “Seller agrees to provide Buyer with 3% of the sales price toward Buyer’s closing costs.”
• Sellers are often advised by their agents to accept such offers in today’s tough market.

Bonus Tip: Address Open Permits in the Contract

The FAR/BAR “As-Is” contract does not require sellers to close out open permits. If this concerns you, add a clause such as:

“Seller agrees to close out all open permits and remedy unpermitted work.”

Need Help?

With 40 years of experience, I can assist with real estate transactions and mortgage pre-approvals. Feel free to reach out! 727-643-6021.

Thanks for reading!